Risks Of Starting A Business In Singapore
Singapore has gained a global reputation as one of the world’s best locations in which business activities may be conducted. Its business-friendly laws and policies, low corporate tax rates, thriving and growing economy, and status as an international hub for commerce and trade have led to its gaining such an enviable reputation. However, although Singapore may be an excellent place in which one may start a company, that does not mean that it is perfect. Just as is the case with any other country in the world, there are inherent risks and negatives that come with starting a company in Singapore. Prospective company owners ought to be aware of these risks before they embark on such a major business venture.
Labor Shortage
One of the key issues that a company owner in Singapore is likely to face is that of an ongoing labor shortage which exists in the country. Singapore’s current labor shortage exists for three reasons. One of these reasons is the age of the population, which is rising rapidly. The increase in average age of Singapore’s population will subsequently lead to lower numbers of young people who are to enter the job market for the first time. The country’s working-age population is expected to peak in 2020 before a protracted decline is expected to take place. Therefore, the aging of Singapore’s population contributes to the country’s labor shortage.
Singapore’s government has also begun to make the laws governing the entry of foreign workers stricter than they once had been. It introduced the first of these stricter policies in 2010 and has continued to add more since then. One of the government’s methods of increasing the difficulty level of foreign workers’ entry into Singapore was that of introducing stricter requirements for one to receive an S Pass or Work Permit. It also introduced a law that mandated all Singapore-based businesses to prioritize locals during the hiring process. Many foreigners who would prefer to work somewhere which does not impose such regulations may be dissuaded from coming to Singapore to work. Therefore, the labor shortage is exacerbated through these policies which reduce the number of employable foreigners in Singapore. The third reason that has contributed to Singapore’s labor shortage is the fact that there is a mismatch between the skills commonly possessed by job seekers and the skills for which there is much demand within the country’s job market. Unfortunately for many a job seeker in Singapore, the skills possessed are often not the skills sought by employers. To combat this problem, several upskilling programs have been started and some universities have increased the emphasis placed on courses that teach skills which are in demand. Despite this fact, this problem has not yet been completely overcome; therefore, it also plays a part in Singapore’s labor shortage.
High Overhead Costs
Overhead costs in Singapore are some of the highest in the world. The country’s small size causes land to be more expensive than it would be in most other locations. This is true regardless of whether one plans to buy or rent land for office space in Singapore. Although costs of rent will vary depending on the region of Singapore in which the office is to be located, the fact remains that everywhere in the country, rental costs are relatively high. This is especially true of land in the Central Business District, which is home to Singapore’s highest rental costs. The costs of resources and materials must also be taken into account. Singapore produces very little in these areas. Therefore, it must import the vast majority of goods required for a business to conduct its operations. Due to this fact, the overhead costs incurred by a business again rise because more expenditure on necessary resources will be required.
Entering an Unsuitable Industry in Singapore
Every prospective company owner in Singapore should carefully consider which industry is to be entered before starting a company there. Those who attempt to establish a company in an industry experiencing difficult times in Singapore might find that the success and profitability of their business will be severely limited. Several of Singapore’s industries have been in an obvious state of decline. This is due to the fact that the corporate landscape surrounding these industries have changed at a rapid rate, causing these industries to find it difficult to keep up with the changes. For example, many departmental stores across the country have suffered much in recent years. This is largely due to the increased influence of e-commerce. For many people, e-commerce makes purchasing any desired items much simpler and more manageable. It is generally much easier to make purchases online than it is to do the same at a departmental store. Furthermore, e-commerce businesses often incur much lower operating costs than departmental stores do.
Travel agencies in Singapore have also fallen on hard times as of late. The increase in popularity of travel websites and apps has led to many people choosing to use such websites and apps to book their vacations. Doing so saves travelers much time and often, much money as well. Travel agencies also have to spend more money than do their online counterparts due to payroll and rent costs. Considering the fact that, as has been mentioned, such costs are relatively high in Singapore, these expenses further hamper the fortunes of travel agencies there. Many print and media companies in Singapore have also been losing much money. This is particularly related to revenue earned from printed material, because more consumers today prefer digital reading material to its printed counterpart. Although such companies have generally enjoyed an increase in revenue earned from digital media, this increase is usually insufficient to cover the losses which they have suffered through their printed media department. Changes in the Singaporean economy and among the country’s consumers affect which industries are most suitable to the country’s economy at any given time. Those planning to start a business in Singapore should therefore be aware of the current economic situation involving each industry in Singapore before doing so.
How to Overcome Major Risk Factors When Starting a Singapore Company
Despite the risks that have already been mentioned, there are also many positives to starting a company in Singapore. There are also ways in which these risk factors could potentially be overcome. One way in which new business owners may deal with the current labor shortage in Singapore is by having job openings for jobs which require skills which are both necessary and possessed by a large number of job seekers. A company that finds a balance between these two areas will be able to attract many job seekers because they are likely to have the requisite skills needed by the company at that time. Careful financial planning will help a company overcome the effects of high overhead costs which have been incurred. As such costs are unavoidable, they ought to be considered when planning a budget for a company. Those who plan to establish a company in Singapore should do as much research as possible before the company is to begin operations. By doing so, they will better understand which industries in Singapore are currently not conducive to economic growth, and thus know that they should stay away from such industries until they take a turn for the better.
Conclusion
As is the case anywhere else in the world, there are both advantages and risks which await those who have the intent of starting a company in Singapore. However, a savvy company owner will be aware of the inherent risks before commencing business operations and take the necessary steps to limit the impact which they are likely to have on the company. Singapore’s openness to business activity and strong economy allow those who start a successful business there to reap tremendous rewards. Therefore, anyone who is interested in starting a company there should familiarize themselves with every potential risk that may affect the company, then take the appropriate steps to ensure that the company will be unaffected.
